Dow Jones Goes Nine Days Straight Without A Loss

The Dow Jones Industrial Average (DIA) gained five points, 0.04%, to make it nine days in a row without a loss.

Most other major U.S. indexes logged small gains as the S&P 500 (SPY) added 0.13%, the Nasdaq 100 (QQQ) lost two points and the Russell 2000 (IWM) climbed 0.39%.

Gold (GLD) lost 0.2% to close at $1558.40/oz. and oil (USO) declined 0.06% to close at $92.52/bbl.

Apple (AAPL) slipped 0.02% to finish the day at $428.35. The widely held stock remains locked in a significant bear market, below both its 50 and 200 day moving averages and far below its highs of last September.

The major U.S. stock indexes remain in significantly overbought territory while the Dow Jones Industrial Average (DIA) sets new records day after day and the S&P 500 (SPY) flirts with its all time high, now approximately 11 points above today’s closing level.

In Wednesday’s economic reports, February Retail Sales gained 1.1%, up from last month’s 0.2% and beating expectations, and a positive spin was put on a meeting between President Obama and Congressional Republican leaders which bolstered hopes for a settlement to the sequestration spending cut standoff. Tomorrow brings weekly new unemployment claims and data on producer prices.

The news from overseas was less rosy as industrial production declined across Europe and most European stock indexes and ETFs were red for the day. European industrial production declined by 0.3% in January and 1.3% year over year, as austerity continues to take hold on the Continent and recession rules the region’s economies.

As the global economy slows, many analysts are forecasting a slowdown in economic activity and stock market correction for the United States as the country’s major trading partners slip deeper into recession. With just fractional GDP growth and the likelihood of a significant decline in government spending, odds grow for a recession and/or stock market correction for the United States in 2013.

Wednesday’s advance in the Dow Jones Industrial Average (DIA) came on extremely low, Holiday-like volume and leaves the Dow Jones Industrial Average and other major U.S. stock indexes at significant resistance levels and in overbought conditions. Taken together, these factors leave the Dow Jones Industrial Average (DIA) and S&P 500 (SPY) vulnerable to at least a short term correction.

Furthermore, global indexes and ETFs like iShares Italy ETF (EWI) and China’s FTSE 25 (FXI) are already in significant downtrends.

Bottom line: The Dow Jones Industrial Average (DIA) continues its record breaking run but is not supported by major global indexes, the S&P 500 (SPY) or robust volume, leaving the current rally susceptible to a significant turn. Overbought conditions add to the risk level of the current environment.

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